John O'Rourke, marketing director for Microsoft's games division, said the company will spend that much to build out the network for online Xbox gaming and to fund research and development for the next version of the console and support for game developers. Microsoft representatives had already said the company would be spending $40 to $50 per game machine--which Microsoft already sells at a loss--to get the Xbox online service running.

The Xbox online service, dubbed Xbox Live, will launch at a date to be announced this fall, O'Rourke said. Unlike online gaming plans recently announced by Sony and Nintendo that allow consoles to connect via an existing Internet account, Xbox Live will be a closed subscription service run by Microsoft.

Microsoft will sell a $49.95 Xbox Live package, O'Rourke said, which includes a 12-month subscription to the service and a headset microphone that connects to the Xbox for voice chat. The fee does not include a broadband connection, which is required to subscribe.

Initial games supporting the service will include football game "NFL Fever 2003" and combat game "Mech Assault," both published by Microsoft, and shooting game "Unreal Championship," published by Infogrames. O'Rourke would not say how many games would come with the service when it launches, but he said there would be at least 50 Xbox Live games by the end of next year.

Some game publishers, most prominently leading game studio Electronic Arts, which has said it has no plans to bring its hit "Madden NFL" franchise to Xbox Live, have expressed doubts about participating in the Microsoft-run service.

But O'Rourke said most publishers appreciate having Microsoft do the heavy lifting required to get games online. "We're building a platform that publishers are really excited about," he said. "They don't have to make the investment in building a network, in building a billing infrastructure...For many developers, that's a huge relief."

O'Rourke said future Xbox Live titles include an Xbox versions of "Star Wars Galaxies," the highly anticipated multiplayer role-playing game being developed by LucasArts, and Sierra's shooting game "CounterStrike," one of the most popular online PC games of all time. Microsoft is also preparing online versions of its popular Xbox titles "Halo" and "Project Gotham Racing."

O'Rourke added that Microsoft would begin accepting sign-ups next week for a beta version of Xbox Live, and the company expects to have 10,000 beta testers by the end of autumn.

In a Microsoft press event held in Los Angeles in advance of the Electronic Entertainment Expo, the game industry's main trade show, Xbox General Manager J. Allard touted the company's experience with the MSN online service as proof Microsoft knows what it's doing with online gaming.

"We're meeting the game industry on our home court," he said. "We can manage and scale a global online community--we've already done it."